Form 1099-DIV is sent to most non-retirement account owners who received a taxable dividend, exempt-interest dividend or capital gain distribution. The information that may be included on the form:
Q. Why did I receive a 1099-DIV on my account?
A. Mutual funds are required to pay distributions of income and realized gains each year. Distributions are taxable to the shareholder even if the distribution is reinvested in the account.
You will not receive a 1099-DIV if:
➢ The account is a tax deferred account such as an IRA Account
➢ The fund did not pay any distributions
Q. Why are the amounts on my 1099-DIV different than on my yearend statement?
A. The fund may determine that distributions paid throughout the year need to be adjusted to properly reflect the fund’s taxable income and capital gains. Income and/or realized gains may be reclassified at the end of the year.
Q. What are the tax rates for capital gains?
Single ||Income |
Married/Filing jointly/Qualifying Widow(er)
Over $425,800 ||Over $479,000 ||20%|
These rates do not include the 3.8% Medicare surtax that may be applicable to net investment income for higher income taxpayers.
Q. What are qualified dividends?
A. Qualified dividends are ordinary dividends received by a shareholder from domestic or qualified foreign corporations that are subject to the same 0%, 15%, or 20% maximum tax rate that applies to net capital gain. They should be shown in box 1b of the Form 1099-DIV.
Q. What are the holding period requirements associated with qualified dividends?
A. Generally, a security must be held more than 61 days of the 121-day holding period surrounding the security's ex-dividend date to qualify for favorable tax treatment of the dividend. With distributions from mutual funds, the holding period requirement applies on both the fund level and the shareholder level. This means that in order for a dividend to be qualified, the fund must have held the security for at least 61 days of the 121-day period. On your Form 1099-DIV, you will be provided with the total of qualified dividends, based on the fund's holding period; however, in order for the dividend to actually qualify, you must have also held the mutual fund shares for at least 61 days of the 121-day period. To calculate your holding period, count the number of days you held the shares starting with the day after the shares were purchased. If the shares were sold, count the number of days held, including the date sold.
Q. What are nondividend distributions and why are they on my Form 1099-DIV?
A. Nondividend distributions are distributions from your fund which are a return of capital to you. You must reduce your cost (or other basis) by the amount shown in Column 3. However, if you get back all of your cost (or other basis), you must report future nontaxable distributions as capital gains even though Form 1099-DIV shows them as nontaxable. Review Publication 550 for assistance in determining if the amount shown in Column 3 is truly nontaxable to you.
Q. What is a return of capital?
A. A return of capital is created when a fund pays more in dividend distributions to investors than it earned on a tax basis during the fund’s fiscal year. A fund may distribute return of capital in order to pay dividends consistent with its respective yields.
Q. Why did I receive a 1099-DIV for my tax-exempt fund(s)?
A. Tax-exempt funds are allowed to invest in taxable securities as outlined in the prospectus. If the tax-exempt funds pay distributions with portions of income and/or realized gains that are taxable, the amounts will be reported on your 1099-DIV. The distributions of income and/or realized gains that are free from federal income tax will be reported on your 1099-DIV in box 11.
Q. Why did my 1099-DIV reflect amounts in foreign tax paid?
A. The foreign tax paid is a credit that is intended to relieve U.S. taxpayers from dual taxation when the foreign source income is taxed both by the United States and the foreign country. The foreign tax paid may be taken as a foreign tax credit or an itemized deduction. If foreign taxes total less than $300 ($600 if married filing jointly) and if all reported foreign tax is reported on 1099 Forms, you are exempt from the foreign tax credit limitation rules and the credit may be claimed on Form 1040. If not, you must file Form 1116 to claim the credit. To elect the deduction you must itemize deductions on Schedule A Form 1040. To claim the credit the shares must have been held for at least 16 days. Please consult your tax advisor to determine which option to elect.
Due to changes in the foreign credit provision of the IRS tax law, shareholders generally no longer need the country-by-country information. (An election is available to claim the aggregate foreign tax amount as a credit.) Please contact Client Services at (888) 923-3355 or visit our website for percentages of foreign source income.
Q. What is Alternative Minimum Tax?
A. The AMT is a separately figured tax that expands the amount of income that is taxed by adding back certain deductions and credit items that may be tax-exempt under the regular tax system.
Q. What tax-exempt income is subject to the AMT?
A. Tax-exempt interest on certain private activity bonds is considered a preference item for the AMT calculation. The portion of this interest is reported in box 12 of the 1099-DIV.
Q. How do I determine if I am subject to the AMT?
A. To determine if you may be subject to the AMT, refer to the Form 1040A and Form 6251 Instructions.